Credit Card Payoff: What’s your answer?


This week my online students were assigned an activity intended to demonstrate the power of compounding interest.
Few had difficulty arriving at accurate answers for two investment scenarios.  But they did have difficulty with calculating how long it would take to pay off credit card debt.
Here’s the challenge:

Newlyweds Chad and Kate want to rid themselves of $6,500 of credit card debt.  The bank charges 18% annual interest and the minimum payment is 2% of the monthly balance.
        1) How long will it take them to pay off the account if paying only the minimum, and
        2) How much will they have paid in interest?
What are your answers?

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